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DECISION OF THE FINANCE MINISTER

Promulgating the regulation on calculation of property, goods and service prices

THE FINANCE MINISTER

Pursuant to Price Ordinance No. 40/2002/UBTVQH10 of April 26, 2002;

Pursuant to the Government's Decree No. 170/2003/ND-CP of December 25, 2003 detailing the implementation of a number of articles of the Price Ordinance;

Pursuant to the Government's Decree No. 86/2002/ND-CP of November 5, 2002 defining the functions, tasks, powers and organizational structures of the ministries and ministerial-level agencies;

Pursuant to the Government's Decree No. 77/2003/ND-CP of July 1, 2003 defining the functions, tasks, powers and organizational structure of the Finance Ministry;

In order to unify the determination of property, goods and service prices, serving as the basis for the price determination for State-priced property, goods and services; for the control of production and circulation costs, goods and service prices when detecting signs of cartel; for the examination of the formation of monopolized prices; for the control of elements constituting property, goods and service prices subject to price stabilization; serving as the basis for organizations and enterprises to make price options and conduct price consultations;

At the proposal of the director of the Price Management Department,

DECIDES:

Article 1.- To promulgate together with this Decision the Regulation on calculation of property, goods and service prices

Article 2.- Organization of implementation

1. The director of the Price Management Department shall be responsible for guiding and supervising enterprises, organizations and individuals (hereinafter collectively called enterprises) dealing in State-priced property, goods and/or services to implement the provisions of the Regulation on calculation of property, goods and service prices, promulgated together with this Decision.

2. Enterprises dealing in State-priced property, goods and/or services; goods and services subject to price stabilization; monopolized goods and services; goods and services in need of price consultations, shall have to fully supply documents and data related to the price calculation prescribed in this Regulation so that the competent state management agencies in charge of prices can approve prices, control costs and prices.

3. Enterprises of all economic sectors may apply the provisions of this Regulation and concurrently base themselves on their production and business efficiency as well as the socially accepted market prices to set the specific prices of property, goods and services falling under their pricing competence.

Article 3.- This Decision takes effect 15 days after its publication in the Official Gazette. To annul Joint Circular No. 05-TT/LB of October 29, 1996 of the Government's Pricing Committee and the Finance Ministry providing provisional guidance on the calculation of production costs as the basis for formulation of costs and selling prices of ship-building industry products for which payments are made from State budget sources, and all previous regulations on calculation of property, goods and service prices, which are contrary to this Decision.

The director of the Price Management Department, the director of the Legal Department, the director of the Ministry's Office, and the heads of the concerned units shall have to organize the implementation of the Regulation on calculation of property, goods and service prices, promulgated together with this Decision.

REGULATION ON CALCULATION OF PROPERTY,

GOODS AND SERVICE PRICES

(Promulgated together with the Finance Minister's Decision No. 06/2005/QD-BTC

of January 18, 2005)

A. GENERAL PROVISIONS

Article 1.- Scope of regulation

1. This Regulation provides for the principles and methods for determination of property, goods and service prices.

2. Organizations, enterprises and individuals shall base themselves on the provisions of this Regulation to make plans on the prices of State-priced property, goods and services; work out plans on price consultations.

3. Competent State management agencies in charge of prices shall base themselves on this Regulation to:

a/ Set, or hold consultations on, the prices of specific property, goods and services falling under their pricing competence.

b/ Control production and circulation costs as well as goods and service prices when detecting signs of cartel or when it is necessary to examine the formation of monopolized prices.

c/ Control the elements constituting the prices of property, goods and services subject to price stabilization, prevent and handle violation acts in price setting, protect the legitimate interests of production and business organizations, enterprises and individuals as well as consumers and the State interests.

4. Property being land priced by the State shall not be regulated by this Regulation.

Article 2.- Subjects of application

This Regulation applies to organizations, enterprises and individuals producing and dealing in (collectively called dealing in) State-priced property, goods and services; goods and services on the list of those subject to price stabilization; goods and services with monopolized or cartelized prices; goods and services subject to price consultation.

Article 3.- Bases for determination of property, goods and service prices

1. Actual and reasonable production costs and sale expenses (the average prevailing production costs) and the quality of property, goods or services at the time of price calculation.

2. Supply-demand relation of property, goods or services and the purchasing power of Vietnam dong.

3. Domestic, regional and world market prices and competitiveness of property, goods or services at the time of price calculation.

4. The State's socio-economic development policies, national, regional or local.

B. METHODS OF DETERMINATION OF PROPERTY,

GOODS AND SERVICE PRICES

I. COMPARISON METHODS

Article 4.- The comparison method is a method of determining property, goods or service prices by analyzing the prevailing purchasing or selling prices of property, goods or services of the same or similar kinds on the domestic, regional and world markets.

1. Property, goods or services of the same kinds of property, goods or services with their prices to be calculated are those identical in all aspects, including:

a/ Physical characteristics of products (such as appearance, constituent materials, manufacturing method, function, use purpose, mechanical, physic, chemical… properties).

b/ Product quality.

c/ Product reputation and trademarks.

2. Property and goods similar to property and goods with their prices to be calculated are those with identical basic characteristics, including:

- Being made of equivalent raw materials and materials by the same manufacturing method.

- Having the same function and use purpose.

- Having equivalent quality.

- Being interchangeable in commercial transactions (purchasers accept to receive this property or goods as substitute for that property or goods).

3. The application of the comparison method must be based on:

a/ The price of property or services already available on the markets (domestic, regional and world).

b/ Major economic and technical parameters of property, goods or services.

c/ Commercial business conditions on the domestic, regional and world markets.

II. EXPENSE METHOD

Article 5.- The expense method is a method of determining property, goods or service prices on the basis of actual and reasonable production and business (hereinafter collectively called business) expenses of property, goods or services and the projected profit.

Production costs and sale expenses are determined as follows:

1. Supplies expenses for price calculation

Supplies expenses, including expenses for raw materials, materials, fuel, power, etc. (hereinafter collectively called supplies), shall be determined on the basis of supplies prices and supplies consumption norms.

For produced goods and services liable to value-added tax, their supplies expenses are calculated according to the following formula:

Supplies

expense

=

Supplies

price (exclusive

of VAT)

x

Supplies

consumption

norm

For produced goods and services not liable to value-added tax:

Supplies

expense

=

Supplies

price (inclusive

of VAT)

x

Supplies

consumption

norm

1.1. Supplies prices used for the calculation of product prices include:

a/ For State-priced supplies: Their prices are those set by the State.

b/ For supplies procured from outside: Their prices are those recorded on the sellers' invoices (for imported supplies with their prices denominated in foreign currencies, such prices shall be converted into Vietnam dong at the average interbank transaction exchange rate announced by Vietnam State Bank at the time of arising) plus (+) import tax and surcharges (if any) plus (+) freight, loading and unloading expense, preservation expense, insurance premium and waste expense according to the permitted norm of waste in circulation (if any), storage, pre-warehousing processing charge (if any), charge for sorting for recycle, which must not be higher than the average prevailing market prices at the time of price calculation.

c/ For self-produced supplies, their prices are the actual ex-warehousing prices plus (+) actual expenses incurred in the self-producing process.

d/ For supplies the processing of which is hired from outside, their prices are the actual ex-warehousing prices for processing plus (+) processing charge plus (+) freight and loading and unloading expense.

The above-said prices of assorted supplies and processing charges, freights, preservation expenses and buying prices (stated at Points b, c and d) must be recorded on invoices and vouchers according to the Finance Ministry's regulations. For supplies being agricultural, forestry and aquatic products directly purchased from producers without invoices, the buyers must make lists of bought goods together with the names and addresses of the goods sellers, goods quantities, unit prices, total amounts paid, signatures of the goods sellers, and the expense approval of the unit heads, enterprise directors general or directors.

1.2. Supplies consumption norm for a product unit:

a/ For goods and services for which supplies consumption norms have been set by competent State agencies, such norms shall apply.

b/ For goods and services for which there are no supplies consumption norms set by competent State bodies, the enterprise directors general or directors (hereinafter called collectively directors) shall work out and approve the supplies consumption norms for application to their enterprises and take responsibility for the accuracy of such norms. For enterprises with Managing Boards, the directors shall work out supplies consumption norms and submit them to the Managing Boards for approval and take responsibility for their accuracy.

2. Fixed asset depreciation amounts for price calculation

2.1. Enterprises' fixed assets (tangible and intangible) used in business must be depreciated for the calculation of property, goods or service prices.

2.2. The specific determination of tangible and intangible fixed assets shall comply with Article 2 of the Regulation on management, use and depreciation of fixed assets, promulgated together with the Finance Minister's Decision No. 206/2003/QD-BTC of December 12, 2003 (hereinafter called Decision No. 206/2003/QD-BTC for short).

2.3. The criteria for recognition of tangible or intangible fixed assets shall comply with the provisions of Article 3 of the Regulation on management, use and depreciation of fixed assets, promulgated together with the Finance Minister's Decision No. 206/2003/QD-BTC.

2.4. The historical costs of tangible or intangible fixed assets shall comply with the provisions of Article 4 of the Regulation on management, use and depreciation of fixed assets, promulgated together with the Finance Minister's Decision No. 206/2003/QD-BTC.

2.5. Where fixed assets have been fully depreciated but are still used in production and business activities, they shall not be further depreciated but their repair or upgrading expenses (if any), as prescribed in Article 7 of the Regulation on management, use and depreciation of fixed assets, promulgated together with the Finance Minister's Decision No. 206/2003/QD-BTC, shall be included for price determination.

2.6. The level of depreciation of fixed assets for price determination shall comply with the Regulation on management, use and depreciation of fixed assets, promulgated together with the Finance Minister's Decision No. 206/2003/QD-BTC.

2.7. The fixed asset depreciation method shall comply with Article 13 of the Regulation on management, use and depreciation of fixed assets, promulgated together with the Finance Minister's Decision No. 206/2003/QD-BTC.

2.8. Allocation of fixed asset depreciation in price:

The allocation of fixed asset depreciation shall be based on the actual formation of fixed assets of enterprises, specifically:

- For fixed assets invested or procured with own capital sources of enterprises, the depreciation allocation shall comply with relevant criteria (wages of principal production workers, product quantities, etc.)

- For fixed assets invested or procured with loans, the depreciation allocation shall comply with loan contracts and relevant criteria.

3. Expenses for salaries, wages and allowances, mid-shift meals

3.1. Salary expenses

Salary expenses of production and business establishments include salaries and salary-based allowances payable to laborers and mid-shift meal money as prescribed by the Labor Code.

Salary expenses shall be determined on the basis of labor norms and unit salary.

a/ Labor norms

- For goods and services for which labor norms have been set by competent State agencies, such labor norms shall apply.

- For goods and services for which labor norms have not yet been set by competent State agencies, the enterprise directors shall work out and approve labor norms for application to their enterprises and take responsibility for these norms. For enterprises with Managing Boards, the directors shall work out and submit labor norms to the Managing Boards for approval and take responsibility for these norms.

b/ Unit salaries

Unit salaries shall be formulated by the enterprises on the basis of the State-prescribed regime of salaries and salary-based allowances.

The formulation method, approving competence and unit salary registration shall comply with current regulations.

3.2. Wage expenses

For enterprises paying wages through labor contracts or collective labor agreements, expenses for wages payable to laborers shall be based on labor contracts or collective labor agreements.

3.3. Expenses for mid-shift meals of laborers shall be decided by the enterprise directors to suit production and business efficiency but must not exceed the State-prescribed minimum salary level. Particularly, expenses for food rations of laborers working in some special jobs shall comply with the provisions of competent state agencies' documents guiding the implementation of the Labor Code and be converted into cash according to the actual buying prices recorded in invoices.

4. Expenses for social insurance, medical insurance and trade union budgets

Expenses for social insurance, medical insurance and trade union budgets for workers directly engaged in production shall be calculated according to the State's current regulations.

5. General expenses

5.1. General expenses calculated according to the State's current regulations include:

a/ Expenses for salaries and amounts of salary nature payable to the management sections.

b/ Expenses for scientific and technological research (excluding funds supported by the State and recovered funds (if any)); expenses for rewards for innovations and improvements that bring about business efficiency; expenses for labor training according to regulations; expenses for healthcare within the business establishments according to regulations.

c/ Severance allowances for laborers according to regulations.

d/ Depreciation of fixed assets being used for the management apparatuses.

e/ Expenses for female laborers according to regulations.

f/ Expenses for labor protection and uniforms according to the norms prescribed by competent agencies.

g/ Deductions for payment into social insurance and medical insurance funds, trade union budgets for the management sections, expenses for supports for activities of the Party and mass organizations in the enterprises, expenses for contributions to the management funds and the business associations' funds according to regulations.

h/ Expenses for payment of interests on loans borrowed from banks, other credit institutions and economic organizations for goods and service production and business at the interest rates recorded in the loan contracts and actual interest payments. For loans granted by other subjects, interests thereon shall be paid according to the actual interest rates agreed in the signed loan contracts, which must, however, not exceed 1.2 times the highest lending interest rate currently applied by the commercial banks having transaction relations with the production and business establishments.

i/ Expenses for advertising, marketing, sale promotion, receptions, festivities, public relations, brokerage commissions, meetings and other expenses which do not exceed 10% of total reasonable expenses allowed to be counted under the provisions of Article 5, Chapter II of this Regulation (excluding expenses mentioned at this Point). For commercial business units, these expenses do not include costs of goods sold.

j/ Travel allowances for enterprises' workers and employees on leave according to the provisions of the Labor Code.

k/ Assorted charges, fees and taxes directly related to goods and service production (excluding enterprise income tax) which the production and business establishments must pay into the State budget according to the provisions of law.

l/ Expenses as contributions to fulfilling the obligations to supply products and/or public-utility services, which are accounted as production expenses according to the provisions of law.

m/ Expenses for enterprise formation, staff training, expenses for advertising before enterprise formation, expenses for the research period, expenses for relocation, commercial advantages other than intangible fixed assets, which shall be gradually allocated into expenses for price calculation for no more than 3 years as from the time the enterprises commence operation.

5.2. Other expenses shall be calculated according to the average reasonable expenses actually incurred by enterprises in three consecutive years immediately preceding the time of price determination, specifically:

a/ Expenses for services purchased from outside:

- Electricity, water, telephone, stationery, cheap and perishable articles, disposable materials and tools for use by the management sections, expenses for hiring auditors, services of legal counseling, designing, establishment and protection of trademarks, purchase of property insurance, human accident insurance; charges for use of technical documents, patents, technology permits not belong to fixed assets, technical services and other services purchased from outside.

- Expenses for hired regular repair of fixed assets.

- Expenses for renting fixed assets operating under lease contracts:

+ House rents: shall be based on the house rent contracts but shall not exceed by 20% the house rent rates prescribed by the provincial-level People's Committees (for houses of the same grade and category).

+ Other fixed assets leased from outside: shall be based on the rents payable in a year according to the lease contracts.

Where rents are paid in a lump sum for fixed assets leased for many years, such rents shall be gradually allocated into production and business expenses according to the number of years during which the fixed assets are used.

- Working trip allowances, including travel expenses, accommodation rents, per diem.

b/ Expenses for the guard of business establishments.

c/ Expenses for other services purchased or hired from outside in direct service of production and business activities.

6. Sale expenses for price calculation

6.1. Expenses for salaries, wages and amounts of salary nature, social insurance, medical insurance, trade union budgets for the sale sections; expenses for product warranty at the sale stage according to regulations.

6.2. Expenses for depreciation of fixed assets used for the sale sections.

6.3. Commissions for sale agents.

6.4. Expenses for hired packing, loading and unloading and transport.

6.5. Expenses for materials and tools used in the process of selling goods and providing services: to be calculated according to the actual and reasonable levels approved by the unit heads or enterprise directors general or directors.

6.6. Expenses for packages and labels: to be calculated according to waste norms based on the approved patterns and designs and according to the prices recorded on the sale invoices.

Article 6.- Expenses not allowed to be included in production expenses

1. Salaries and wages paid by the business establishments not in accordance with the Labor Code's provisions on labor contracts, except for cases of hiring labor for pieceworks.

2. Fines paid for administrative violations in accordance with the provisions of the Ordinance on Handling of Administrative Violations and guiding documents of state agencies competent to sanction violations; fines paid for late payment of loan interests and other fines according to the current provisions of law.

3. Amounts deducted in advance for spending but not spent up, such as expenses for fixed-asset repair; expenses for goods or construction work warranty, and other amounts deducted in advance.

4. Expenses not related to production and business, such as expenses on capital construction investments, procurement of intangible and tangible fixed assets, supports for mass organizations and social organizations (outside the enterprises), supports for localities, expenses for charity purposes.

5. Expenses paid from other funding sources: non-business expenses, sickness and maternity expenses, allowances for regular or unexpected difficulties, other expenses paid from other funding sources, other unreasonable expenses.

6. Expenses in excess of the norms prescribed by the State or enterprises.

Article 7.- Expense allocation

For general expenses and expenses related to many subjects, such as fixed-asset depreciation, salaries, social insurance and medical insurance premiums and trade union budgets and sale expenses defined in Article 5 of this Regulation, which are inseparable, they shall be gathered and allocated according to the relevant criteria for each subject.

For cheap and perishable articles, 50% or 100% of the value of such articles, depending on their kinds and the practical situation of the enterprises, shall be directly allocated.

Article 8.- Expected profits for price calculation

On the basis of the provisions of Article 3 of this Regulation, organizations, enterprises and individuals producing and/or dealing in property, goods and services shall project reasonable profits to ensure that the determined selling prices shall not exceed the market prices.

Article 9.- Determination of selling prices of property, goods and services

1. Selling prices of home-made goods

The selling prices shall be determined according to the following formula:

Selling price = Production cost + sale expense + Projected profit + Special consumption tax (if any) + Value added tax (if any)

2. Selling prices of imported goods

The selling price of imported goods shall include the import price plus (+) the sale expense plus (+) projected profit plus (+) value added tax (if any).

a/ The import price shall be determined according to the following formula:

Import price = Selling price at border gate + Import tax (if any) + Special consumption tax + Other expenses in cash according to regulations

In which:

- The selling price at Vietnamese border gate is the buying price in the original foreign currency multiplied (x) by the interbank exchange rate announced by Vietnam State Bank at the time of importation.

- Import tax, special consumption tax (if any) according to current law provisions.

- Other expenses in cash according to regulations.

b/ Sale expenses shall be determined according to the provisions of Clause 6, Article 5 of this Regulation.

c/ Projected profit shall be determined according to the provisions of Article 8 of this Regulation.

d/ Valued added tax shall comply with the VAT Law.

C. SELECTION OF PRICE CALCULATION METHODS

Article 10.- On the basis of the characteristics of each type of property, goods or services and their use value, the conditions on markets and circulation of specific or services, organizations, enterprises and individuals may select the property, goods or service price determination method for making price plans according to regulations./.